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AA Bankruptcy FAQ

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Will there be a trustee overseeing AA operations while in bankruptcy? And if so, who?

AA is a debtor in possession. That means that the existing management and board of directors, and not a bankruptcy trustee, will continue to run the operations during the bankruptcy process.

Why is it important to be on the Creditors Committee ?

The Creditors’ Committee balances the needs of all unsecured creditors. “Balance” means that no one group – certainly not hard-working employees who have already made voluntary concessions – should have to meet an unfair share of the costs of AMR management’s decision to file for bankruptcy. The Creditors Committee is typically made up of the debtor’s largest unsecured creditors. The Committee represents the interests of the Debtor’s unsecured creditors as a whole. The Debtor can hire professional (as we did) lawyers and financial advisers to assist the Committee. The professionals assist the Committee in several key areas:

  • Review and analyze the Debtor’s financial records, determining if the Debtor can successfully reorganize.
  • Assess how much the Debtor can afford to pay to unsecured creditors through a plan of reorganization.
  • Protect the Committee’s interest throughout the process, including representation before the court.
  • Police the Debtor – make sure the Debtor operates its business to maximize the return to creditors.
  • Drive the case toward reorganization influence and/or control the Debtor’s business decisions with an eye toward eventual payments to unsecured creditors.
  • Balance the Secured Creditors power – they can be heard on almost every issue in this case, giving the Committee significant power to negotiate with the various parties in the case.
  • Negotiate the terms of a Plan of Reorganization. This is the single most important function of the Committee. The Debtor must have a court approved Plan of Reorganization. This plan is a new agreement that determines how the reorganization entity will treat the creditors.

Are we going to hire Attorneys to represent us in the bankruptcy filings?

The TWU retained a bankruptcy attorney at the beginning of this year in case a bankruptcy happened. Mrs Levine is a highly sought after attorney. She has already got us on the creditors committee for court.

What is a Confidentiality Pledge?

Due to the sensitive nature of the bankruptcy proceedings, the International Administrative Committee, ATD staff, Consultants, all AA/AE Local Presidents and all AA/AE Negotiating Committee members have signed the following document. Download the Confidentiality Pledge

If they decide to close the bases, who will represent us in bankruptcy and in negotiations?

On December 8, 2011 the TWU International Administrative Committee met with all the TWU Local Presidents and accredited representatives who represent TWU members at both American Airlines and American Eagle.  In that meeting all the TWU local negotiating committee members appointed members from their committees to assist the TWU Air Transport Division Representatives and the TWU attorney’s.  The TWU International along with representatives from the locals will also be involved in the process.

The international has said that they are going to do a road show. When and where is it, and who from the international will be there?

The dates and locations of the DFW meetings are January 10 and 11 at the DFW Hyatt and Local 567 offices respectively.  The TWU Attorney’s Sharon Levine and Mark Richard will be in attendance.  Prior meetings have already been convened in the Tulsa, Chicago, and Miami areas.  Check with your Local for future meeting dates.

How do we get our Local President involved in the proceeding because I don’t trust the international?

The TWU Bankruptcy and Labor Attorney’s are nationally recognized as being top in their fields.  Your Local President is involved in the pre-1113 c process once American Airlines attorney’s present to the TWU their ‘ask’ or term sheet.  If that process doesn’t produce a consensual agreement the post 1113c proceedings will begin and your local President voted to appoint another local president to represent line maintenance.   The bankruptcy process includes transcripts of the proceedings.

Can the local hire our own attorney, or are we forced to use the internationals?

The TWU International has hired nationally recognized attorneys who are top in their fields.  The TWU is responsible for the collective bargaining agreements and legally responsible to ensure our members are represented correctly.  Again, the bankruptcy process includes transcripts of the proceedings.

Is there any way that the court and committee proceeding be videotaped so we can watch what goes on?

The court determines the proper media for documenting the proceedings and there has never been a bankruptcy court proceeding videotaped.  But again, the bankruptcy process includes transcripts of the proceedings.

How many A&P mechanics are at the three bases?

There are approximately 3,600 A&P licensed mechanics at the three overhaul bases.

Do you think that the company will leave the 50/55 rule in effect?

At this time we don’t know what contract or in company policy changes will be proposed by management or what changes will end up being implemented in the bankruptcy proceedings.

Will the company be scaling back the airplane orders?

There has been no indication thus far that the company intends to reduce the aircraft orders they had placed prior to entering bankruptcy.

Will we be able to fly on other airlines, such as ID90 and ZED fares?

At this time we don’t know what changes if any will be made by management to the travel policy.

When did the local and the international find out about the bankruptcy filing?

Early in the morning November 29, 2011- the day the Company filed.

When could we possibly see some effects from the bankruptcy?

We don’t know yet, the next scheduled hearing date is January 26, 2012.  But the Company can request to go in front of the judge at any time.

Will our 2003 concessions have any weight in the court room?

Yes, that and all the cost saving initiatives that the TWU has taken part of should influence both the judge and the creditors committee to what extent we don’t know at this point.

Would the company have been better off filing for bankruptcy back in 2003?

We don’t speculate, but one thing we do know is the members would not have been better off if AA filed bankruptcy back in 2003.

How much money is in the retirement medical trust?

That information along with other trust or financial information is confidential at this time.

What does the local leadership want from the membership?

Stay informed, visit the TWU Bankruptcy website at http://aa.twu.org/  sign up for updates (email or text) and send your local President any questions you may have.  In addition, attend the bankruptcy informational meeting at the DFW Hyatt (C Terminal Side) on January 10, 2012 at 0800, 1100 and 1500.

Does the local have a plan in place to talk in the proceedings?

The TWU has provided the opportunity for all Locals to have representation in the pre and post 1113c proceedings.

How many judges will be at the proceeding?

One- The Honorable Sean H. Lane

What is the judge’s background?

To view the Honorable Sean H. Lane’s profile click here: http://www.nysb.uscourts.gov/judges/shl.html

Can the union get a commercial lien instead of being a creditor at the proceeding?

No –The TWU does not have the ability to gain any liens against any property of AA for claims arising under any CBA.

What is D.I.P. financing, and why has the company not gotten any?

By filing with $4.1 billion in cash on hand, American Airlines can operate in Chapter 11 without the constraints of a DIP facility.

Are we going to have a finance guy involved?

The TWU International Economist John Donnelly will be involved and at some point investment bankers on behalf of the TWU.

Is the union going to ask for shared sacrifice going forward?

Yes, it is important that management is impacted the same as it’s workers, unfortunately the judges in previous bankruptcies have awarded executive management windfalls of cash for the company to “keep it’s talent”.


What Happens to My Employer’s Union Contract?

An employer’s bankruptcy filing does not immediately affect the status of its collective bargaining agreement with the Union. All of the contract’s provisions continue to govern the debtor’s post-filing obligations to Union employees, including the applicable grievance procedures.

Under section 1113 of the Bankruptcy Code, the bankruptcy court may authorize an employer to reject—and thus terminate—a collective bargaining agreement if the debtor can prove to the bankruptcy court that
1. it proposed modifications to the collective bargaining agreement to the union;
2. the proposed modifications are necessary to permit the debtor’s reorganization;
3. the debtor met with the union and shared information justifying the proposed modifications;
4. the debtor negotiated in good faith with the union; and
5. the union refused to accept the proposal modifications without good cause.
What modifications are “necessary” is not defined by the Bankruptcy Code, and courts use varying definitions. Essentially, however, section 1113 requires your employer to negotiate with the Union in good faith to modify its collective bargaining agreement before seeking authority to reject the contract.
If your employer successfully rejects its collective bargaining agreement, the Union remains your authorized representative, and the company must comply with applicable labor laws and continue to bargain with the Union in good faith.

Can AMR stop the grievance procedures without bargaining with the TWU?

No, until the CBAs are modified or rejected, all elements of the CBAs remain in full force and effect. However, any grievances that were commenced or relate to matters that first arose before AMR filed for bankruptcy may be subject to the automatic stay of the Bankruptcy Code. This means that those grievances will not proceed as they would have outside of bankruptcy.

How likely would a merger be?

A merger with another airline is a possibility. We are monitoring all issues, including potential merger transactions, but it is too early to know if there will be a merger.

Will we lose our sick bank of accumulated sick days in the bankruptcy?

We could lose our sick bank if the company asked the judge to relieve them of that part of the contract.

Will we be refunded our pre-funding money during the bankruptcy and will the next contract proposal have concessions?

We do not know at this time if in bankruptcy that the company will get out of paying back the pre-fund money. The next proposals will be when we meet with the company and try to get an agreement to keep TWU contract out of the courts hands. The agreement if we get one will certainly be concessional.

Whats happen to system protection and the ability to “bump” in the the event of a layoff. In other words if they “throw out the contract” are all our protections gone? And just what can the company change to the contract, ie: seniority protections, grievance rights, etc.

If the judge decided that bumping was going to cause the company harm he could throw out bumping rights in our contract. I do not think in recent cases judges have been throwing that part of the contract out.

The question has been raised of what the outcome would be in Bankruptcy Court if TWU, in negotiations pursuant to Section 1113, does not reach agreement with AA/AE for any given class or craft of AA or AE employees?

There is no single answer to this question, but a number of possibilities.  The court may impose the original contract proposal made by AA/AE in the 1113 negotiations (the “original ask” ); it may impose the last proposal made by AA/AE in the course of the negotiations; or it may simply grant the company motion to reject the contract without specifying what should be imposed.  In the absence of law requiring one result or another, the result will depend to at least some extent on the discretion of the Bankruptcy Judge, who will make his determination based on all of the relevant facts presented to him, including those regarding the economics of the airline and the nature of the unsuccessful negotiations.

We gave up money before; will we have to give up more again?

At this time we don’t know what contract changes will be proposed by management or what changes will end up being implemented in the bankruptcy proceedings, there could be changes to pensions, benefits, wages and work rules etc.

Are they obligated to pay benefits, vacation, and pension that were earned 180 days prior to the filing?

Benefits, vacation, and pension that were earned with the 180 days prior to the filing are afforded a priority up to a cap of $11,725 and paid ahead of generally unsecured creditors.

What will happen to our severance if there is a layoff; do we still get it?

At this time we don’t know what contract changes will be proposed by management or what changes will end up being implemented in the bankruptcy proceedings.

What historically has happened in the bumping of overhaul mechanics at United, Northwest, and others when they outsourced their overhaul maintenance?

In previous airline bankruptcies courts normally honor seniority and reduction in force procedures that are normally utilized during the reduction of the workforce.

Any idea on the number of layoffs that may happen?

At this time we don’t know what contract changes will be proposed by management or what changes will end up being implemented in the bankruptcy proceedings.

Will the bankruptcy filing affect the Stores line stock move at DFW?

At this time we don’t know what contract changes will be proposed by management or what changes will end up being implemented in the bankruptcy proceedings.

How do we compare to our peers in pay and benefits?

Check with your local for the wage and benefit comparisons within the industry for the classification you are in.

Can the company change things without negotiating?

If management and the TWU cannot reach a consensual agreements by negotiating modifications to the collective bargaining agreements, only then can the Company can ask the Judge to abrogate the agreements and make necessary modifications to the agreements to successfully restructure the company.

What is the status of the transfer system?

The transfer system is still active and there has not been a system freeze.

How will the most junior AMT’s know of any impending layoffs?

If and when layoffs are determined to be necessary for the company’s restructuring all the TWU locals will be notified and they in turn notify their members.

What are the chances of a spinoff of overhaul or the line?

At this time we don’t know what contractual changes will be proposed by management or what changes will end up being implemented in the bankruptcy proceedings.

Can we negotiate a lump sum retirement instead of the Defined Benefit Plan?

We can try to negotiate anything, but too ask for a change to the retirement plan that would cause the company to lay out more cash and achieving that is unlikely.

Will we be getting our retirement medical money back?

We don’t know what contract changes will be proposed by management or what changes will end up being implemented in the bankruptcy proceedings.

What’s going to happen to any ongoing litigation?

We don’t know what contract changes will be proposed by management or what changes will end up being implemented in the bankruptcy proceedings, however, for now the grievance procedures remain unchanged.

If the pilot’s contract is abrogated, would it lessen the impact on our members?

Typically if the bankruptcy proceedings get to the point of where the company is requesting the abrogation of an agreement of a particular group, unless the other groups have a consensual agreements their agreements would also be subject to the judge ruling to abrogate.

Will we get paid for field trip expenses?

Yes, currently there are no changes to the contract or company polices.


Will we most likely lose retiree medical and if we do will TWU help us find affordable insurance? Also is there going to be separate representation for retiree’s?

If the retirement plan is turned over to the PBGC you will lose the retiree medical. The TWU is using the same attorney  we retained for the members to represent the retirees also. I do not know what the TWU plans to do about finding an affordable medical plan.


Will CBAs be negotiated while the union is negotiating the current CBA, or is it more likely that the Bankruptcy Court will decide the issue?

Under Bankruptcy Code section 1113 CBAs will be negotiated among the company and the TWU, with any revisions being subject to approval of the members who are in good standing with the TWU. However, if an agreement is not ratified prior to the Bankruptcy Court issuing a decision on the section 1113 motion, the Bankruptcy Court decides whether to grant or deny the company’s motion, but will not rewrite the CBA. Before the court makes that decision the TWU intends to give its members the opportunity to vote on the company’s last proposal, even if the TWU and the company have not reached agreement on a TA.

Who will lead the negotiations with AA in the bankruptcy proceedings as they relate to the Fleet Services Group?

Representatives of the TWU will lead the efforts in connection with all negotiations and other matters in the AA chapter 11 cases. Counsel will provide legal advice and other assistance, as requested by the representatives.

Does the TWU membership get to vote on any agreement to modify the CBA?

Yes, all members of each contract group who are in good standing with the TWU are entitled to vote to approve or reject proposed modifications to the CBAs. Any modifications must be approved by a majority of the members affected by the CBA in question.

Will there be any input from the mediator going forward?

Not usually, unless during the post 1113 c process there is a need for testimony.

What happens to the Fleet Service tentative agreement?

AA Senior Vice President notified the TWU via letter on November 29, 2011 that they will not finalize nor implement the Fleet Service and Dispatch tentative agreements.  All Locals were notified.


What about My Pension?

As a safeguard against the risk that a defined benefit pension plan may contain insufficient funds to pay the promised benefits to workers upon retirement, a federal statute, ERISA, imposes minimum funding standards on plan sponsors. ERISA also established a pension insurance program that guarantees that retirees receive at least some of their earned benefits if and when an employer terminated an under-funded defined benefit plan. The Pension Benefit Guaranty Corporation (“PBGC”) administers the pension insurance program. If a pension plan has insufficient assets to pay benefits, regardless of whether the plan sponsor is in bankruptcy, the PBGC will either provide financial assistance to the plan to enable it to pay certain guaranteed benefits or take over the plan and pay benefits directly to beneficiaries, up to a statutory maximum. For plans terminated in 2011, the PBGC’s maximum benefit amount is $4,500 per month ($54,000 per year).

Can a member receive benefits from the PBGC upon AA’s terminating its pension plan if he or she is already receiving benefits from the PBGC for a previously terminated (i.e. Eastern or TWA) pension plan?

If you are entitled to benefits under more than one plan assumed by the PBGC, you may not be entitled to the full amount you would have been entitled to under each of those plans separately. Rather, there may be a further limit on the total amount of PBGC benefits that an individual can receive even if the benefits are paid under different pension plans that have been assumed by the PBGC. The limit is determined on a case-by-case basis in the PBGC’s discretion and depends on how much has been paid by the PBGC to an individual under all eligible plans.

If AMR terminates the pension plans and PBGC takes over, is there a lag in pension checks being delivered and how much notice does the retiree get if there is?

All retirees will receive notice if AMR intends to terminate the pension plans. The amount of such notice is dependent on certain factors, but the amount of notice will be approximately 45 to 60 days. Once the PBGC assumes control of the terminated plans, retirees entitled to benefits will receive a separate notice of benefits directly from the PBGC. There may be a lag in the delivery of pension checks as the PBGC assumes control, but the PBGC has historically endeavored to effect a seamless transition to limit the interruption of benefits.

Can AMR stop meeting its pension obligations to current employees without bargaining with the TWU?

AMR can apply to the Bankruptcy Court for approval to terminate its pension plans.

What benefits are available to a member who retires now?

All current benefits are available to members choosing to retire now. However, these benefits could be altered or terminated if AMR receives Bankruptcy Court approval to terminate its pension plans.

If a plan is nearly fully funded, does the law allow PBGC to treat the plan differently as to payouts or is the non distressed status irrelevant?

The PBGC treats all terminated plans the same, regardless of the level of the funding before termination.

If I am already retired can the bankruptcy effect my current retirement payments?

Yes, but only if the pension plan is terminated and the PBGC takes over as the statutory trustee of the plan.  If someone is already receiving benefits, the PBGC will review the plan records to determine what benefits that person will receive. 

The PBGC will continue paying without interruption during their review, but those payments, an estimate of the benefits that PBGC can pay under the insurance program, may be less than what the person was receiving from his or her plan.

When the PBGC’s calculations are complete, they will send a formal determination of benefits.  The PBGC notes that the process may take two to three years from the date the PBGC takes over as trustee of the plan.

See http://www.pbgc.gov/wr/benefits/payments/if-you-are-already-receiving-benefits.html

I would like to retire before the pension goes into the PBGC, But I am afraid I will lose my money because they will use the bankruptcy as a reference line to cut my monthly pay from the pension. In other words, If I retire now will my medical and monthly pay be safe?

Retiring now will not change the outcome of turning our plan over to the PBGC. If it is turned over you will lose the medical portion of your plan but the money you take home will not change.

If I retire today would I get 100% of what is due to me at the time of retirement per age and service 12/02/11?

Yes except you would lose medical if the plans get turned over to the PBGC.

Do most companies go to a 401K pension plan after ending the defined Benefit Plan?

Previous bankruptcy cases had various retirement plans take the place of defined benefit plans e.g. defined contribution plans and matching 401k plans etc.

What is this PBGC?

The Pension Benefit Guaranty Corporation (“PBGC”) administers the pension insurance program. If a pension plan has insufficient assets to pay benefits, regardless of whether the plan sponsor is in bankruptcy, the PBGC will either provide financial assistance to the plan to enable it to pay certain guaranteed benefits or take over the plan and pay benefits directly to beneficiaries, up to a statutory maximum. For plans terminated in 2011, the PBGC’s maximum benefit amount is $4,500 per month ($54,000 per year).

Is the PBGC cap of $54,500 a year or per a month?

For plans terminated in 2011, the PBGC’s maximum benefit amount is $4,500 per month ($54,000 per year).

How many beneficiary options are available under the PBGC?

While pensions that are terminated are insured under the PBGC, beneficiary options may be reduced.   See the PBGC website http://www.pbgc.gov for details.

If at retirement age, would it be beneficial to retire now?

That is completely up to each individual when you retire based on your circumstances. Retiring now will not change the outcome of turning the retirement plan over to the PBGC. If the Company is successful in obtaining a distressed termination from the PBGC and the defined retirement plans are turned over you will lose the medical portion of your plan. Please visit the PBGC website at http://www.pbgc.gov

If we have been retired and over age 61, would our pension still go to the PBGC if the pensions do in fact go to the PBGC?

If the Company is successful in obtaining a distressed termination of their retirement plans from the PBGC the answer is Yes: Please visit the PBGC website athttp://www.pbgc.gov

Will the pension checks keep on coming?

As of this writing, the Debtor (AA) is honoring payments related to pre-petition employee obligations.

What is the required funding of the pensions?

ERISA governs the pension funding requirements; the company has been compliant with those requirements on all their retirement plans.

Looking for a Seniority list?

You can see the latest Seniority list on JetNet.aa.com.
Go to the following link: Seniority List
You will need to log in to your JetNet account.

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